Dissolved Companies - what happens next?
Dissolved Companies – what happens next?
A company can be dissolved and struck off by the Registrar of Companies if they do not make the required return to Companies House.
Sometimes this happens when the directors of RMCs move away and no one replaces them or when returns and affairs get neglected so that the company may seem, to Companies House, to be inoperative and not ‘carrying on business’.
Once the company has been dissolved, its assets become ‘bona vacantia’ (literally meaning ‘ownerless goods’) and automatically pass to the Crown. The company’s bank account will be frozen and any credit balance will be transferred to the Crown. Where an RMC has a freehold interest in land this will also pass to the Crown. However, the Crown does not assume any liabilities of the dissolved company and so will not maintain the common parts of any land, or insure it.
The Bona Vacantia division of the Crown is administered by the Treasury Solicitor’s department. As the Crown do not take on the liabilities of companies they often disclaim the land (i.e. give up rights to) if they consider it is onerous or valueless property. This is often the case with common parts on estates or blocks of flats.
Nothing on the Title Registers of the property changes when property becomes bona vacantia so the Land Registry will still show the dissolved company as the Registered Proprietor (owner).
Disclaimer by the treasury solicitor
If assets are disclaimed then they are treated as if they never belonged to the Crown at all. The effect of disclaimer on freehold property is that the freehold interest that once belonged to the dissolved company extinguishes and the land itself reverts to the Crown as part of the Crown Estate. This is a process called Escheat.
The effect of disclaimer on leases is that the lease is extinguished but remains subject to the provisions for disclaimer set out in the Companies Act. In practical terms the vesting of a leasehold estate is less likely as the landlord could have taken action to recover the property prior to the company being dissolved. If the landlord did not forfeit the lease until after the company was dissolved, then the lease would vest in the Crown and they would have had the right to apply for relief from forfeiture. If they took no action, the lease could be extinguished by the landlord.
SLC can advise on:
Mortgages or loans secured against the property
If there is a mortgage or charge secured against the property, the mortgage or loan provider will usually have a statutory right to sell the property to recover the debt owed to it. The Crown usually permits this right of sale on the proviso that, after the lending has been repaid, that any surplus funds are handed over to the Crown. If, however, there is negative equity the Crown will usually disclaim the property.
Sale of bona vacantia property
The Crown can also sell bona vacantia property and it is obliged to obtain the full open market value for it. If the property is tenanted then the Crown may offer to sell the freehold or head leasehold to the tenants. If that offer is made then all tenants will need to discuss it and agree and then proceed in accordance with the Treasury Solicitor’s guidelines. Even if all tenants do not agree to join in with the purchase it may still proceed as long as the Treasury Solicitor is notified of those tenants who have declined the offer. Legal advice should be sought by the tenants before proceeding.
Restoration of the company
If the tenants are the members of the former company then they may have a right to restore the company which may be a cheaper option than an outright purchase of the property. The price to be paid is calculated by reference to a formula and the Treasury Solicitor’s legal costs must also be met by the tenants. Sometimes it will also be necessary to obtain the consent of the freeholder to the sale to the tenants and its’ legal cost will also be payable by the tenants.
An application for administrative restoration of the company to the Register must be made by a former director or member of the company within 6 years of the dissolution and can only be applied for if the company was struck off under s1000 of the Companies Act 2006 i.e. if It was struck off for failure to carry on business.
There will usually be penalties to be paid to Companies House for late filing and late accounts. The penalties vary depending on the length of time the documentation has been outstanding.
The effect of administrative restoration is as if the company has never been dissolved.
Repayment of funds on restoration
If a dissolved company is restored to the register then the Treasury Solicitor will refund any cash balances belonging to the dissolved company collected on dissolution as well as the proceeds of sale of any assets sold when the company was dissolved.
All the staff at SLC Solicitors would like to wish you a very Merry Christmas...